Karnataka Busts Rs 2,384 Crore Fake ITC Racket, Two More Held In Expanding GST Fraud Probe

Last Updated:May 13, 2026, 22:09 IST

The probe revealed fake ITC claims worth nearly Rs 420 crore through suspicious transactions linked to the wider network.

Officials of the Karnataka Commercial Taxes Department uncovered a massive fake Input Tax Credit (ITC) fraud network involving suspected transactions worth Rs 2,384 crore, with two more individuals detained in the ongoing probe. The latest arrests of Hussain Baig and Saleemulla Baig take the total number of people detained in the case this year to seven, officials said.

According to investigators, the racket involved the creation of fake invoices and fraudulent GST Input Tax Credit claims linked to transactions in tungsten carbide scrap, e-waste and other scrap materials. Officials said the accused allegedly generated bogus tax invoices to illegally avail ITC benefits under the Goods and Services Tax (GST) system.

Network Of 127 Fake Firms Uncovered

During the investigation, authorities identified a suspected network of 127 fake firms allegedly used to route fraudulent transactions. The probe revealed fake ITC claims worth nearly Rs 420 crore through suspicious transactions linked to the wider network.

Investigators found that 72 firms were actively involved in questionable dealings. One of the accused, Saleemulla Baig, is alleged to have received fake ITC worth Rs 382 crore through transactions valued at Rs 2,172 crore routed via multiple entities. Another accused, Hussain Baig, is alleged to have obtained fake ITC worth Rs 35 crore through transactions amounting to Rs 212 crore, routed through 55 firms.

Sharp Rise In Turnover Raises Suspicion

Officials also flagged irregularities in SKS Traders, where turnover reportedly surged from Rs 50 crore to Rs 900 crore within three years without supporting documentation or verifiable business activity. Investigators said this abnormal growth pattern strengthened suspicions of fabricated transactions and helped establish the broader fraud network.

Earlier in January, authorities had arrested five individuals in connection with suspicious transactions worth Rs 1,464 crore. With the latest detentions, the total number of arrests in the case this year has risen to seven. Officials said the investigation under GST laws is continuing, with efforts underway to trace the full extent of the fake invoicing network and identify additional beneficiaries.

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